Transfer of Title

"I don't understand why I'd want a home warranty," says your buyer, Ted. "The home inspection said there weren't any problems." How should you respond to Ted?

"It's absolutely your decision. But the inspector can't predict problems that haven't happened yet." That's right. The home inspection is a snapshot in time. Home warranties are a type of insurance which lasts for a given period of time, so they cover conditions that didn't exist at the time of the inspection.

Katherine purchased a property for $255,000, borrowing $242,250. The assessed value of the property is $249,700. The property appraisal came in at $257,000. Which of these amounts is used in calculating the transfer tax?

$255,00 - purchase price

Juan purchased a property for $420,000 and financed $336,000 of it. The assessed value of the property is $387,000. The property appraisal came in at $432,000. Which of these amounts is used in calculating the property tax?

$387,000

John and Amy purchased a builder's home warranty when they bought their home. They have found structural damage that could be a detriment to their home. On average, how many years does a home warranty cover structural damage?

10 years

builders warranties amount of years to fix it?

10 years

John and Amy purchased a builder's home warranty when they bought their home. They have a problem with the footers that could lead to serious problems with their home. How many years does a builder's home warranty typically cover this type of damage?

10 years. Correct. A footer issue is a foundation issue, which means a structural problem. Structural issues are typically covered for 10 years in builder's warranties.

Lynette purchased a property under a bargain and sale deed. Which statement best describes the covenants Lynette's deed provides?

A bargain and sale deed may come with or without covenants of warranty. - A bargain and sale deed may come with or without covenants of warranty. Generally, however, it's known for not containing warranties.

Which of the following would be considered a foreign person according to FIRPTA?

A company incorporated in France with regional development offices in the U.S.

Related to title insurance, what is "subrogation"?

A covered party grants permission to the title company to pursue the party who caused a claim or loss. - When the title company is forced to pay a claim against the policy, the covered parties give the title company permission to pursue the party who caused the loss. The covered parties are said to "subrogate" their rights to the title company.

Select the statement that accurately reflects the type of deed used for the transfer.

A deed of trust conveys real estate to a trustee for the beneficiary named in the deed.

Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question?

A home warranty will cover things like appliances and major systems.

Lamar closes on his new home next week. It's a 37-year-old split level, so his agent asked if he's interested in purchasing a home warranty. "Why would I need a warranty?" he wondered. "Didn't the home inspection identify all of the issues?" What's the agent's best response to Lamar's question?

A home warranty will cover things like appliances and major systems. - A home warranty often covers appliances and major systems. Also, even the systems that WERE inspected are subject to problems or failure.

Jerrica is set to close on the property she's buying on Friday. Because of other delays in the closing date, Jerrica's interest rate as of the day of closing will increase by 1/4 of a percent. What impact does this have on the closing?

A new Closing Disclosure must be issued at least three days before the closing date. - Any interest rate change of more than 1/8 of a percent requires a new Closing Disclosure, triggering a new three-day waiting period.

Title insurance covers claims by individuals who live or lived on the property in question, as long as what's in place?

A public record of tenancy

Li Meng purchased a property that had been owned by the same man for more than 40 years. The title search was clean. In the spring, she started seeing traffic on the path to her dock and discovered that the previous owner had always allowed the locals to use his path to get to the lake. What covenant may have been breached?

Against encumbrances - The previous property owner failed to disclose to Li Meng that there was an easement (which is an encumbrance) across the property.

Which statement accurately describes an abstract of title?

An abstract of title documents a property's chain of title.

Which of the following is more likely to act as a closing agent?

An attorney or title company representative

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing?

An existing interest rate lock may expire before the transaction is ready to close.

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing?

An existing interest rate lock may expire before the transaction is ready to close. - Interest rate locks are only viable for a short period of time. The transaction time to close a distressed property sale may be longer than the interest rate lock period, forcing the buyer to lock the rate again and potentially increase loan fees.

How might the lengthy purchase process for a short sale or foreclosure impact a buyer's financing?

An existing interest rate lock may expire before the transaction is ready to close. Interest rate locks are only viable for a short period of time. The transaction time to close a distressed property sale may be longer than the interest rate lock period, forcing the buyer to lock the rate again and potentially increase loan fees.

Ray purchased a new home and soon discovered an issue with one of the windows. He filed a claim with the warranty provider, but it was denied. After mediation, the issue still remains unresolved. What is the most common next step?

Arbitration

Ray purchased a new home and soon discovered an issue with one of the windows. He filed a claim with the warranty provider, but it was denied. After mediation, the issue still remains unresolved. What is the most common next step?

Arbitration - Warranties will detail the course of action if a claim is disputed. Most often, mediation occurs first, then arbitration. The arbitration decision is generally binding and final. The disputed claim process seeks to avoid or limit litigation.

A closing agent has several duties to perform before the closing, as well as several after. Which of the following is a task the closing agent must complete after the closing?

Arrange payoff of the existing loan. The title search, closing statement preparation, and title insurance purchase must all be completed prior to closing. After closing, the closing agent makes arrangements to pay off the seller's existing loan with the proceeds from the buyer. "We're recorded and funded" is music to a licensee's ears.

Through the divorce process, Gail was granted ownership of the couple's vacation timeshare. Gail is ready to sell the timeshare but discovers that her ex-husband Daniel's name is still on the deed, creating a cloud on the title. What should Gail do?

Ask Daniel to sign a quitclaim deed to release his ownership share.

Margot and Steve owned several rental properties at the time of their divorce. The divorce decree gave ownership to Margot in return for a cash payment by Steve. Fast forward six years, and Margot is ready to sell the properties. She soon discovers, though, that Steve's name is still on the title. What's her best course of action?

Ask Steve to generate quit-claim deeds on the properties.

Tracy is looking in the MLS and sees a listing marked "REO." Which of these statements regarding REOs is correct?

Banks acquire REOs through failed foreclosure sales or deed in lieu of foreclosure actions. - Failed foreclosure sales and deed in lieu of foreclosure actions result in lenders taking title to properties they previously had mortgage loans on. These properties are called real estate-owned, or REO.

Why is a foreclosure more likely to have title issues than a non-foreclosure?

Borrowers who can't afford loan payments may have taken out other loans against the property.

Jennings has received a Closing Disclosure from his lender. What's the purpose of this form?

C. To detail the costs Jennings will owe at closing. The Closing Disclosure (aka settlement statement) is provided at least three days before closing and details the buyer's closing costs as well as other loan terms, such as the projected monthly payment.

Why did the implementation of TRID impact closing dates?

Certain financing changes may trigger a new three-day waiting period. - Increases in the annual percentage rate, the addition of a pre-payment penalty, or changes to the basic loan product require that the lender issue a new Closing Disclosure, necessitating a new three-day waiting period.

A deed states, "For love and affection, the receipt and sufficiency of which is hereby acknowledged." What does this statement represent in the deed?

Consideration - Consideration (something of value) is required for transfer of this deed. In a traditional sale, the consideration is the purchase price stated in the deed. In deed transfers, "for love and affection" may be the consideration offered.

Darren and Natalie are first-time buyers who have decided to purchase a newly built townhouse. Their agent, Jenner, tells them that the builder must provide a one-year home warranty. Which of the following conditions is most likely true?

Darren and Natalie are using an FHA-insured loan. - All loans that are either FHA-insured or VA-guaranteed require that the builder provide a one-year home warranty to protect both the buyer and the home's value.

Mario lives in a state that requires an abstract of title for property conveyance. The chain of title is broken approximately 50 years prior to the current date. Which of these properly identifies the status of Mario's title?

Depending on his state's laws, Mario may have marketable title. - If a link in the chain of title is broken, the attorney performing the search will branch out from public records to try to mend the link. State laws dictate how far back the chain must be unbroken for a title to be marketable.

Which task is NOT the responsibility of an escrow officer?

Determine how earnest money is to be distributed in case of a dispute. - The escrow officer is responsible for distributing the earnest money as outlined by the parties or the courts in case of dispute but doesn't have the authority to determine how it should be distributed.

Which type of deed conveys real property from a decedent's estate to a buyer?

Executor's deed

What information would the Loan Estimate NOT provide to buyers under the TRID-required disclosures law?

Final closing costs. Lenders provide the Loan Estimate (LE) within three days of the borrower's application. The LE includes an estimate of the borrower's mortgage-related costs.

Stu is buying Freddie's property. What must occur for the transfer of title to take place?

Freddie must deliver the deed to Stu. Property is conveyed when the grantor delivers a properly executed deed to the grantee. Freddie must sign the deed and deliver it to Stu.

Two essential elements of a deed are the _________.

Grantor's signature and conveyance clause

What's the purpose of title insurance?

It protects the buyer against loss resulting from previously unreported title defects.

When property changes hands, the deed is recorded and a fee is charged. What is the benefit to the grantee of having the deed recorded?

It puts the public on notice regarding ownership.

What's the relationship between the Loan Estimate and the Closing Disclosure?

Lenders issue the Loan Estimate within three days of receiving an application, and Closing Disclosure figures should be similar to the Loan Estimate.

What information does the Loan Estimate provide to buyers under required disclosures law?

Loan payment schedule - Lenders provide the Loan Estimate within three days of receiving a borrower's application. Borrowers receive final closing cost information (on the Closing Disclosure) three days before closing.

Margo's accountant tells her that she's eligible to deduct the property taxes she paid on her residence. Select the statement about this deduction that's true.

Margo is in the ownership stage of the property ownership lifecycle. In general, both investors and homeowners may be eligible to deduct annual property taxes. Investors deduct them as a business expense; homeowners deduct them if they are able to itemize deductions.

Which of these statements about title marketability standards is correct?

Marketable title carries a higher standard of assurance than insurable title. - Marketable title isn't necessarily perfect title. It may have unknown defects or even known defects that are considered acceptable to a reasonable buyer.

Marsha's title insurance policy was issued on closing day, which was June 18. The policy lists the standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which one of these will NOT be addressed in the schedule of exceptions?

Marsha's second mortgage on the property, which she plans to get next January

Marsha's title insurance policy was issued on closing day, which was June 18. The policy lists standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which of these will NOT be addressed in the schedule of exceptions?

Marsha's second mortgage on the property, which was properly recorded in January. - Well done! Title insurance typically covers events or claims filed on the public record before the title insurance policy's effective date but excludes disclosed and undisclosed easements.

Marsha's title insurance policy was issued on closing day, which was June 18. The policy lists standard exclusions as well as requirements for the company to issue the policy, such as paying off existing recorded liens. Which of these will NOT be addressed in the schedule of exceptions?

Marsha's second mortgage on the property, which was properly recorded in January. Title insurance typically covers events or claims filed on the public record before the title insurance policy's effective date but excludes disclosed and undisclosed easements.

Most often, what's the first course of action for disputed home warranty claims?

Mediation

Most often, what's the first course of action for disputed home warranty claims?

Mediation - Warranties will detail the course of action if a claim is disputed. Most often, mediation occurs first, then arbitration.

Murphey's farm has been in his family for generations, since his great-great-great-grandfather received it as a land grant in 1862. What's the beginning point of this property's chain of title?

Murphey, the current owner - Chain of title always begins with the current owner and goes back in time, so the chain of title on Murphey's farm begins with Murphey, the current owner.

Murphey's farm has been in his family for generations, since his great-great-great-grandfather received it as a land grant in 1862. What's the beginning point of this property's chain of title?

Murphey, the current owner. Chain of title always begins with the current owner and goes back in time, so the chain of title on Murphey's farm begins with Murphey, the current owner.

Joshua just got a copy of the preliminary report from his title company and is surprised to see that there's a mechanic's lien against his property. What is the first step he should take to clear this lien?

Pay the bill that resulted in the mechanic's title. In order to file a mechanic's lien, the lienholder must provide notice to the property holder of the lien. Joshua needs to pay the bill that resulted in the lien OR prove that the bill was indeed paid.

On a closing statement, ______ goes in the seller's credit column and the buyer's debit column.

Prepaids - Prepaid items—such as prepaid utilities—are a seller credit and buyer debit.

What's a typical prepaid item that goes into a seller's credit column and a buyer's debit column on a closing statement?

Property taxes - Prepaid items—such as prepaid taxes—are a seller credit and buyer debit. Taxes owed but not yet paid are not prepaid items.

When a buyer finances a newly built home with a Federal Housing Administration loan, what does the FHA require the builder to do?

Purchase a third-party home warranty to protect the buyer

When a buyer finances a newly built home with a Federal Housing Administration loan, what does the FHA require the builder to do?

Purchase a third-party home warranty to protect the buyer - The FHA requires builders of new homes to provide a third-party warranty to buyers.

Kristin has been unable to make her mortgage payments. Her property went to auction but the lender didn't accept the high bid. What stage of the foreclosure process is this property now in?

Real estate-owned - If a foreclosed property goes to auction and doesn't sell, title goes back to the lender, and the property is considered real estate-owned by that lender.

Which of these statements about the homeowner's right of redemption is true?

Rights of redemption window with REOs may have expired. - Because of the length of time it takes to process a property after the foreclosure sale, the homeowner's redemption period may have expired before the lender puts the REO on the market.

David lost his job and can no longer afford the payments on his home. His sister suggested a short sale. Since you were his real estate agent when he bought the house, he called you to find out as much as he can about short sales. Which of the following is a true statement?

Short sales are sometimes used as an alternative to foreclosure, but could negatively impact his credit rating.

Katherine is purchasing a second home as an investment/vacation property. She has a large down payment, and the seller is financing the rest of the purchase. Which of these statements is true?

The Closing Disclosure and Loan Estimate aren't required in a seller-financed transaction.

Henrietta is 17 years old. She wants to sell the property given to her by her grandmother. Which covenant provided by the general warranty deed may prevent her from doing so?

The covenant of the right to convey

Which one of these statements accurately represents one of the required elements in a deed?

The deed includes an act of conveyance.

Which of these statements accurately represents one of the required elements in a deed?

The deed language includes an act of conveyance and may include a habendum clause. The grantor is the seller; the grantee is the buyer. The grantor must sign the deed, be of legal capacity, and be positively identified. The deed must include an act of conveyance and may include a habendum clause.

Reuben purchased a property from a seller who gave him a general warranty deed. What's true of Reuben's deed to this property?

The deed provides the greatest protection available from a grantor to a grantee. - A general warranty deed is the most desirable type of deed and, of all the deed types, provides the most protection for the buyer.

Which option is true if a deed is not recorded after closing?

The legal ownership of the property can be challenged. If a deed isn't recorded after closing, legal ownership of the property can be challenged. Recording isn't required, but it's difficult for a property owner to prove ownership without public recordation of the deed.

Carly's closing on an REO property was suddenly delayed due to an internal audit. What does this mean?

The lender has requested a title audit to ensure that the foreclosure was properly handled.

What does an REO on a lender's assets mean?

The lender owns real estate after a foreclosure sale.

When purchasing a short sale or foreclosure, what's one of the biggest frustrations buyers face?

The length of time it takes to purchase a distressed property - The purchase of a distressed property can take at least twice as long as the purchase of a traditional property.

Quad City National Bank has several REO properties on its books. Why does the bank own these properties?

The properties went through the foreclosure process and didn't sell at auction. - When a bank forecloses on a property and tries but fails to sell it at auction, the bank then takes title to the property. The property becomes REO—real estate-owned—and the bank attempts to sell it through regular channels.

Jorge accepted a seller's offer of insurable title. The transaction hasn't reached closing, and a previously unknown title defect has been revealed. What happens now?

The seller may not be required to attempt to clear the defect before closing. - The seller may not be required to clear the defect before closing; depending on the type of defect (e.g., an easement) it may not impact closing. Other types of defects may require action before closing.

Which of these guarantees is offered by a general warranty deed but not a special warranty deed?

The seller will defend against all claims against the property's title. - With a general warranty deed, the seller will defend against all claims on title; with a special warranty deed, the seller warrants only those claims that stem from when he owned the property.

What special concern do foreclosed properties often present?

There could be hidden title issues.

What special concern do foreclosed properties often present?

There could be hidden title issues. The most common concern when purchasing a foreclosure is the state of the title. An unclear chain of ownership can make future sale of the property difficult.

Danette hasn't paid her property's water bill for the first quarter, which was due on April 1. She's closing with her property's buyer, Jason, on April 1. What type of expense is this and how will it appear on the settlement statement?

This is an accrued expense and will appear as a seller debit and a buyer credit. Because this bill is due but hasn't been paid, it's an accrued item and will appear as a buyer credit and seller debit at closing.

What type of insurance is a form of indemnity insurance that can protect both the buyer and the buyer's lender?

Title insurance

Your buyer is worried that after she closes on her property, she'll find out someone else has a claim to its ownership. What can reassure her?

Title insurance - Title insurance protects property buyers from financial loss due to title defects. However, it covers only those items included in the policy.

Jennings has received a Closing Disclosure from his lender. What's the purpose of this form?

To detail all costs Jennings will owe at closing - The Closing Disclosure, provided at least three business days before closing, details the buyer's closing costs, as well as other loan terms, such as the projected monthly payment.

A quitclaim deed does which one of the following?

Transfers without warranty any interest or title the grantor has when conveying it.

Which of the following is a typical accrued adjustment?

Unpaid real estate taxes

Christina purchased a house from Thomas. When did she officially gain ownership of the property?

With the transfer of deed from the seller to the buyer

Corinne, an escrow agent, is preparing for the Thomas/Trenton closing in four days. Which of these documents will Corinne prepare?

Working with the lender, she'll prepare the settlement statement, which details the costs the buyer and seller will have at closing. - Just prior to closing, the closing agent will prepare all the closing documents, including settlement statements that detail all the money changing hands on closing day.

Aldrich is conveying marketable title to a property buyer. Should he also furnish a title insurance policy?

Yes, because title defects not revealed in a title search can crop up even with marketable title.

When you're representing a client in a real estate transaction, what's your responsibility regarding tax advice?

You should tell clients the typical ways that taxes will apply and encourage them to seek advice from a tax professional.

The element of a deed that signifies the grantor's intention to transfer title to the grantee is the ______.

act of conveyance

what do both a special warranty deed and a general warranty deed guarantee?

both guarantee that the grantor owns the property, that the grantor is legally permitted to sell the property, state that the property is free of debts or encumbrances acquired during the grantor's ownership period except those noted on the deed

Which of the following is an instrument of conveyance?

deed

Derrick just bought his first condo, and he's ready to crack the champagne. Which of the following will Derrick be able to deduct from his income for tax purposes?

discount points - Fees and other closing costs don't qualify as tax deductions, but discount points—which are paid to a lender to get a lower rate or to buy down the interest rate—can be deducted.

What can buyers do to protect themselves from title issues when purchasing property?

purchase title insurance

Ari owned acreage in a rural area. He sold a small portion of it to a neighbor in an informal transaction but made no record of the sale or change of ownership. A developer offered Ari several million dollars for the entire acreage, and Ari eagerly accepted the offer. What covenant is Ari in danger of violating?

seisin

Which of these guarantees is offered by a general warranty deed but NOT a special warranty deed?

the seller will defend against all claims against the property's title. Special warranty deeds are guaranteed to be free from any encumbrances brought about during the grantor's ownership of the property, but not before that. So if someone else comes forward with a claim outside of the time the grantor owned the property, the grantee is on his or her own to fight it.

The seller and _______ must approve a short sale.

the seller's lender

Which one of the following protects the owner against financial loss if the real estate title has defects?

title insurance